Hill & Smith abandons £10.5m acquisition after row with markets watchdog

SHIRLEY-based Hill & Smith has abandoned the proposed £10.5m acquisition of a Shropshire galvanising firm following a disagreement with markets watchdog, the Competition and Markets Authority.

Hill & Smith announced in April that its subsidiary, Joseph Ash, intended to acquire Telford-based W Corbett in order to improve its offering in the galvanising sector.

However, it was warned at the time that the approach could pique the interest of the Competition and Markets Authority due to the impact the deal could have on the supply of galvanising services in the West Midlands.

The CMA said it intended to carry out an in-depth investigation into the deal unless it received assurances the galvanising industry in the West Midlands would not be compromised.

In a statement, Hill & Smith said that after careful consideration it had offered certain undertakings to try and address the CMA’s concerns – even though it said it did not agree with them.

“Unfortunately the CMA believes that these undertakings will not remedy the concerns identified by their Phase 1 review,” said the company.

“We are disappointed that these undertakings have not been accepted and consequently having reflected on the costs and uncertainty involved in a Phase 2 process, we have decided to abandon the transaction, which was, in any case, conditional on Phase 1 clearance.”

In a statement last month, the CMA said it had found that the “proposed acquisition may be expected to result in a substantial lessening of competition in the supply of galvanising services in the West Midlands region around the Corbett galvanising plant in Telford. This represents an important regional market for these services”.

During its investigation, the CMA said it had received a number of concerns from customers that the proposed acquisition would lessen competition and lead to higher prices. Other evidence gathered by the CMA indicated that the companies compete closely and are two of the three main galvanisers in the area served by W Corbett.

It added that the competition provided by other galvanisers in the area may not be sufficient to meet the challenge posed by the merged business.

Andrea Coscelli, CMA Executive Director of Markets and Mergers and decision-maker in the case, said: “A number of important manufacturers in the UK rely on competitively priced inputs such as this for the production of their goods. When competition is reduced and results in higher prices, the ability of these manufacturers to compete nationally and internationally can suffer – and can in turn lead to increased prices for their own customers.

“We are concerned to preserve the existing level of competition in the West Midlands region where Joseph Ash and W Corbett currently compete. W Corbett is a large independent player and has provided a strong competitive constraint to its established rivals for many years.

“Unless Joseph Ash offers undertakings that resolve the competition concerns, this transaction will face an in-depth investigation to assess whether this merger might result in higher prices for manufacturers using these services.”